Alan Daley & Steve Pociask

Mobile wireless is an American success story. It saves us in emergencies. It keeps us in contact with our spouse, children, parents, co-workers and lets us speak our minds to friends. More recently, wireless services enable consumers to “see” loved ones and to conduct business with associates. We rank it highly for serving these purposes and for the value it delivers. Unfortunately, the mobile phone has become a tool of the tax authorities – adding an average 17% above the charges due to the wireless carriers and with seven states above 20%.

President Reagan would not have been surprised. He knew how government worked: “If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.”

Mobile wireless services have jumped ahead as a wildly popular consumer technology despite spectrum-hoarding bureaucrats in the late 1980s and early 1990s. It is so popular and useful that regulators invented a new subsidy around it. And because it still has vigor, they now tax it at rates higher than other goods and services.

At 233% of the general sales tax rate, it’s clear that policy makers have singled out free-speech and mobile phone use for a sales-tax shellacking. With one survey finding that only 3% consumers believed mobile taxes should be higher than sales taxes – it is safe to conclude that consumers detest these taxes.

Why tax what we should be encouraging?

We object especially to uniquely oppressive levels of tax applied to mobile wireless. In fact, wireless taxes tend to target young, minority and lower income residents who disproportionately use these services, often as their only phone and broadband device. For example, in Baltimore City, where the median household income averaged $38,186 in 2010, wireless subscribers pay a $4 per line surcharge in addition to other end-user taxes. Compared neighbors in Baltimore County, where median household income averaged $62,300 in 2010, taxes on a five-phone family discount plan would pay an extra $20 per month per subscriber in the city, plus other taxes.

That is pretty harsh.

Mobile wireless services are certainly not worthy of sin-tax treatment. Abusive tax levels on mobile wireless should not be up to bureaucrats or politicians who use taxpayer-supplied megaphones, TV cameras, and teleprompters – everyone can see the hypocrisy this entails.

As federal state and local legislators across the country propose cleaning up special tax code deductions and rates, they should take a close look at this mess. In addition, the Senate should finish its job and consider the Wireless Tax Fairness Act and stop the harm this imposes on consumers.

Alan Daley and Steve Pociask write on consumer policy issues for the American Consumer Institute.